Private equity giant KKR & Co. announced plans to acquire the rest of retirement and life insurance company Global Atlantic Financial Group and follow it with a series of strategic initiatives including modifications to its fee structure.
In a Nov. 29 news release, KKR said it has agreed to acquire the remaining 37% stake of retirement and life insurance company Global Atlantic Financial Group for about $2.7 billion.
Under the terms of the deal, which is expected to close in the first quarter of 2024, KKR will pay an amount in cash to Global Atlantic's minority shareholders equal to its book value with certain adjustment and will fund the transaction from its balance sheet, which had $23 billion in cash and investments as of Sept. 30, according to the news release.
KKR originally purchased a majority stake of about 60% in Global Atlantic Financial in February 2021 for about $4.7 billion. Since then, Global Atlantic has continued to be led by chairman, CEO and co-founder Allan Levine and KKR has served as its investment manager.
Also in the news release, KKR announced new strategic initiatives that are contingent upon the closing of the Global Atlantic deal. One of the three announced initiatives is the creation of a new business segment called strategic holdings.
"The new segment will principally be comprised of KKR's core private equity balance sheet holdings," the news release said. "Core private equity has scaled into a business with $35 billion of assets under management, including $6.5 billion of assets on KKR's balance sheet. Given the maturation and strong performance of these companies, KKR expects to begin receiving more recurring cash dividends from this segment of the balance sheet."
Another initiative is that KKR will draw a greater share of compensation from carried interest instead of fee earnings. That adjustment is "expected to result in enhanced shareholder value by delivering more of the firm's recurring revenues to shareholders."
And the third initiative is to report a new key metric called total operating earnings, which will consist of fee-related earnings, strategic holdings and insurance operating earnings, in order to "highlight the growth of its more recurring earnings streams."
Joe Bae and Scott Nuttall, co-CEOs of KKR, said in the news release of the Global Atlantic transaction: "The strategic partnership we envisioned three years ago has exceeded our expectations. It has been transformative for both businesses and a great cultural fit that has enabled us to contribute to Global Atlantic's continued strong performance and success, while also being a key driver of growth for KKR. We expect the new ownership structure will foster even closer collaboration, allowing us to fully leverage our complementary strengths and grow faster together."
As of Sept. 30, KKR had $527.7 billion in assets under management.
